There is evidence that it's not directly the size of an object that determines how hard it is to entangle, but rather the number of degrees of freedom you're trying to entangle. More degrees of freedom is more difficult because your entanglement tends to go places you don't expect, resulting in an apparent loss of quantum behavior. Larger objects have more degrees of freedom, so they're generally harder to entangle.

Well, people are working on quantum computers and quantum cryptography. The Zeilinger group has been successful in creating entangled photons and transmitting them between two islands, which is a fairly large distance.

The main problem with larger objects is how to affect them in such a way as to create an entangled state. Creating an entangled state requires an interaction between the entangled objects and for macroscopic objects, there are many, many "unwanted" interactions overshadowing the desired quantum effects. Genuine particle wave effects, such as diffraction, have been observed using molecules as large as a buckyball (C60 fullerene). There might not be a hard physical limit separating macro- and microcosmos - to our knowledge there is no theoretical one, anyways.